Report: Shell gives in to state

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Company agrees to postpone closing its Bakersfield refinery so buyers can be found.

Sacramento Bee

In a concession to California officials, Shell Oil Co. reportedly has agreed to postpone the shutdown of its Bakersfield refinery. The plant was scheduled to close Oct. 1.

The refinery will stay open indefinitely, giving prospective buyers more time to prepare their bids, according to a report Thursday by New Jersey-based Oil Price Information Service.

State officials and consumer advocates have been badgering Shell for months to keep the plant open or make a stronger effort to sell it, arguing that losing the plant’s production would lead to higher fuel prices. The Federal Trade Commission launched an investigation as well.

Shell spokesman David Harrington had no comment. Nor did Tom Dresslar, a spokesman for Attorney General Bill Lockyer. Lockyer had hired a consultant from Texas to study Shell‘s claims the plant was becoming less economically viable. The consultant reportedly had concluded the plant was viable.

Though it’s one of the smallest refineries in California, the facility produces 2 percent of the state’s gasoline and 6 percent of its diesel.

Experts say California’s gas supply is so flighty that even a tiny drop in production can produce big jumps in prices. Severin Borenstein of the University of California Energy Institute said the plant shutdown could boost prices 10 percent to 15 percent – a prospect that had state officials howling at a time when regular unleaded gas was running at $2-plus a gallon.

Now it appears the refinery is getting at least a temporary reprieve.

“If it’s true, it’s a big victory for consumers and for regulators,” said consumer advocate Jamie Court of the Foundation for Taxpayer and Consumer Rights in Santa Monica. “It looks like Shell‘s finally conceding it’s a very profitable refinery and prospects for sale are good.”

Court said he’s been told that about a dozen buyers are interested but the Oct. 1 shutdown didn’t give them enough time to study the plant’s economics. The oil-price service said 30 potential bidders requested information from Shell, and 10 were interested enough to sign confidentiality agreements.

Shell‘s shutdown plans have been criticized for months. Internal company documents unearthed by Court’s organization showed the plant made money four of the past six years, including $4.7 million last year.

But Shell officials said those documents didn’t tell the whole story. In fact, they said, the declining availability of crude oil in the fields around Bakersfield, where production has fallen 20 percent since 1988, was turning the refinery into a loser. They also said the plant was aging, inefficient and needed $1 billion in equipment upgrades.

Shell planned to increase production at its East Bay refinery, and import more product from its Anacortes, Wash., refinery. But the company acknowledged it wouldn’t be enough to make up for the loss of production at Bakersfield.
The Bee’s Dale Kasler can be reached at (916) 321-1066 or [email protected]

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